STANDARDS IN ECONOMICS

STANDARDS IN PERSONAL FINANCE

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Students encounter the concept of scarcity in their daily tasks but have little comprehension as to its meaning or how to deal with the concept of scarcity. Scarcity is really about knowing that often life is 'This OR That' not 'This AND That'. This lesson plan for students in grades K-2 and 3-5 introduces the concept of scarcity by illustrating how time is finite and how life involves a series of choices. Specifically, this lesson teaches students about scarcity and choice: Scarcity means we all have to make choices and all choices involve "costs." Not only do you have to make a choice every minute of the day because of scarcity, but, when making a choice, you have to give up something. This cost is called oppportunity cost. Opportunity cost is defined as the value of the next best thing you would have chosen. It is not the value of all things you could have chosen. Choice gives us 'benefits' and choice gives us 'costs'. Not only do you have to make a choice every minute of the day, because of scarcity, but also, when making a choice, you have to give up something of value (opportunity cost). To be asked to make a choice between 'this toy OR that toy' is difficult for students who want every toy. A goal in life for each of us is to look at our wants, determine our opportunities, and try and make the best choices by weighing the benefits and costs.

KEY CONCEPTS

STUDENTS WILL

Explain why they cannot have everything they want because of scarcity.

Describe why scarcity is characterized by “this OR that” and not “this AND that”.

Define opportunity cost.

Explain how all choices have costs.

Identify five choices we make every day in preparing to go to school and identify the opportunity costs associated with each choice.

INTRODUCTION

To know what Economics is about, you have to understand scarcity. Scarcity means that you always want more than you can have. Every person—-child and adult, rich and poor, U.S. citizen and non U.S. citizen—-has to deal with scarcity every minute of the day, because no one can have everything they want. You cannot have all the time you want. You cannot have every toy you want. You cannot have more of anything you want without having less of something else you want. All choices have costs. Not only do you have to make a choice because of scarcity, but the cost of making that choice means you give up the chance to get something else. This is called opportunity cost.

Therefore, the choice you make is very important. Not only do you have to make a choice, because of scarcity, but also, when you making a choice, you have to give up something.

PROCESS

In the story poem, Scarcity does not understand that the world is “this OR that,” not “this AND that”. In other words, when you make a choice, you have to give up something else, which is the cost of the choice. Scarcity is limited to one toy as a gift from Mother for her birthday. Then, Scarcity is limited to one toy as a gift from Mother for Christmas. But Scarcity does not believe it is fair, or right, to have to choose. She does not want to pay the cost of having to give something up when she makes a choice. She wants every toy that she can see.

1.Scarcity does not understand the difference between “this AND that” and “this OR that”. What is the difference?

[Discuss with the students the meaning of the words “AND” and “OR”. Discuss why Scarcity cannot have everything in life that she wants. For example, Scarcity cannot have every toy that she wants, every piece of candy that she wants or every pet that she wants, and so on.]

2.Why does Scarcity want every toy on the magic tree?

[Because she does not understand scarcity; that she cannot have it all. Discuss with the students why we cannot have everything thing we want because of limitations, such as time and money.]

3. There are 10 gifts on a tree. Select two gifts. Mother says it's OK to get one of the two gifts, but not both. You must choose between two gifts. What is the opportunity cost of this choice?

[The answer varies. It may be the eight gifts on the tree if a student wants all the toys, plus other costs. The student also has to give up their other toy of choice. Other costs might include the following: playing with a friend, riding a bike, eating candy, etc. See the discussion on opportunity and cost below.]

ASSESSMENT ACTIVITY

Assessment Activity 1:
Identify five choices you made today preparing for school. For each choice list the opportunity cost. (Remember, opportunity cost is the next best thing you would choose to do.)

[Possible answers: to wear the red or blue sweater, to eat cereal or toast, to ride in the car or walk, to take lunch money or a lunch to school, to brush your teeth or not.]

Assessment Activity 2:
Discuss opportunities that Scarcity gave up (costs) by choosing to spend the night picking toys off of the magic tree.

[She did not eat dinner, she did not get to sleep, she did not get to play with a friend or a pet.]

CONCLUSION

Because of scarcity, we all have to make choices. No one, not even you, can have everything they want. Every time you make a choice, you have to give up something.

EXTENSION ACTIVITY

Discussion questions:

1. Why does Scarcity believe she wants every toy?

[Because she does not understand scarcity—we cannot have everything we want.]

2. Can you help Scarcity to understand what types of wants will help her stay healthy?

[food, water, sleep, medical assistance]

Do the Health Wants vs. Fun Wants activity. Separate the items in the activity based on wants that are fun to have and wants the help us stay healthy.

[Generally, the bottle of medicine, doctor, water, and shelter would be identified as wants that are required to keep us healthy. The rest of the items are wants that are fun to have, but are not required to keep us healthy.]

EDUCATOR REVIEWS

“This is a great way to introduce several concepts of economics to high school students with learning disabilities. Hopefully they'll have fun with the poem. Thanks for the help!”

Sarah P., Chicago, IL
POSTED ON August 22, 2004

“Very well done!”

Rachel, Fresno State
POSTED ON September 27, 2004

“This is a great lesson!”

Linda Carson, Quenemo, KS
POSTED ON October 11, 2004

“Really great lesson! Perfect for grades K-2.”

Amber, Fresno, CA
POSTED ON February 3, 2005

“Great lesson! We used it as an intro/review activity for my 6th grade class.”

Katie
POSTED ON February 25, 2005

“Great ideas! I really enjoy using this website to teach these difficult concepts to my students.”

Agatha Harrison, Richmond, VI
POSTED ON April 5, 2005

“My daughter Pat totally adores this site. She learned to study her lessons while surfing the net. It helps her understands her lessons easily.”

Mikaelle Patricia, St. Paul College
POSTED ON September 12, 2006

“This is such a great website! I fully understand our lessons now. It made me analyze things more clearly. I also enjoyed going to this site. My sister and I open this site everyday to study. Continue to rock our world!!”

Sarah Mareen, St. Paul College
POSTED ON September 12, 2006

“Wonderful job! I teach high school and this will be excellent to use with them.”

Julia Jones
POSTED ON October 6, 2006

“Well done! Easy lesson to adapt for all levels.”

Mary A.
POSTED ON November 20, 2006

“We found this to be a great lesson with good definitions. The poem was cute, but long for students to read on their own. Possibly a recording to go along with poem for students to hear. Good job relating activity to students lives.”

Renee, Ashley, & Alicia, OH
POSTED ON February 21, 2008

“I enjoyed reading this lesson. I think that the concept of the lesson is very good. The students can relate their own lives to the lesson as they all have or want toys. The poem is a nice addition to the lesson. I like that it is on the computer since technology is a growing part of the classroom. I agree with a comment posted on this page that the poem is a bit lengthy and maybe difficult for some students to read. Therefore, I believe a great addition to this lesson would be a recording for the students to listen to as they read the poem. I also appreciate the assessment activities and extension activities along with this lesson.”

Stephanie M., Cincinnati, OH
POSTED ON February 29, 2008

“Excellent.”

Nabyendu D., Kolkata, IN
POSTED ON September 28, 2008

“The concept it good, but the poem is too long and a bit silly (and not in a good way). The girl's name is "Scarcity" which is confusing because this is also an economics term. I recommend changing the name to save on confusion.”

Ams, Tampa, FL
POSTED ON October 29, 2008

“Using a diagram explain the concept of scarcity, choice, and opportunity.”

achar, nairobi, IL
POSTED ON May 19, 2009

“A good lesson on scarcity for all ages. We must learn that we all have to make choices. No one can have everything they want in life. Love the Health Wants vs Fun Wants poster and the poem was a little lengthy, but overall it was cute. I will use this lesson in my class.”